patrick.net

I'd venture we have a bit more to go downward.
Oil is still accumulating and storage is disappearing fast.

Heraclitusstudent says

I'd venture we have a bit more to go downward.

It wasn't the best report and the CEO looked very unsure on CNBC ... but the price action wasn't too bad even though the stocks really didn't to much

New homes median sale price (SA) was $282,600, down 3.2% from Dec and down 4.6% from a year earlier. Lowest median sale price since Sep '14

This is what I was talking about, you have to know look to see if we have profit margin hits or is the falling median price a function of lower priced homes

https://finance.yahoo.com/news/theres-reason-excited-u-housing-152551847.html

When the brothers toll start pumping away a large decline in sales, it's time to be cautious.

mell says

When the brothers toll start pumping away a large decline in sales, it's time to be cautious.

You can side why I targeted TOL first outside all the builders last year on CNBC

Ironman says

Sales in the West dropped -32%.

Even more expensive out west.

Some people might believe the Median Price peak or slight decline is very bad, I say it's more a bullish factor since the cycle was so high end

But companies like KBH are trading at liquidation value under $10 when we talked about it before

Logan Mohtashami says

Not an inflection point, but a continuation of what started in 2012.......Massive price increases.

Strategist says

Massive price increases.

I know you guys on Pat.net care so much about price, which isn't the main thing with me because everyone talking about Price were Housing bubble pushers in the last cycle

However, look at it this way a

If you can't even match sales expectations with rates below 4% and rising inventory, then what is a builder to do

Hence why value is their for KHB since it's selling at liquidation but TOL need more demand convictions for TOL and others

Logan Mohtashami says

This is what I was talking about, you have to know look to see if we have profit margin hits or is the falling median price a function of lower priced homes

Profit margins are one thing. Profits an other.

Logan Mohtashami says

If you can't even match sales expectations with rates below 4% and rising inventory, then what is a builder to do

Build more basic, lower priced home. Stop focusing on the overpriced luxury.

Heraclitusstudent says

Profit margins are one thing. Profits an other.

If it was only that easy ;-)

Heraclitusstudent says

Build more basic, lower priced home

DHI is trying to get into that market

But I believe the new century long push to build bigger homes has caught up to the builders, this is a core thesis of mine over the years on why new homes wasn't going to have Nirvana escape velocity that some on wall street had predicted

The fact year 8th of the economic cycle, 5.8 months of inventory and under 4% rates, to even have a Year over Year Miss with a baseline 500K total home sales year last year

(*$#@)_#@(*#@ ;-)

Next 4 months revisions and median price will be telling, if we can get growing sales with low price inflation, = more smaller homes coming into the market place and this is what is needed

Need to see a in line number tomorrow for new homes 510 with no negative revisions.

Then we can work on getting some growth in the next 4 months year over years. The Comps year over year get a lot easier after tomorrows report

Notice the builders are acting better!

Logan Mohtashami says

Notice the builders are acting better!

At this time next year, ITB will be 50% higher at $40.00. IMHO.

Strategist says

At this time next year, ITB will be 50% higher at $40.00. IMHO.

Ughhhh

You better had picked up some shares with the recent dip!

Logan Mohtashami says

Strategist says

At this time next year, ITB will be 50% higher at $40.00. IMHO.

Ughhhh

You better had picked up some shares with the recent dip!

Have enough shares on ITB. Picked up 100 option contracts (leaps) on the dip. I'm very very confident.

Strategist says

Picked up 100 option contracts (leaps) on the dip

fair enough

Logan Mohtashami says

Strategist says

Picked up 100 option contracts (leaps) on the dip

fair enough

What about you? Go for the leaps. You will thank me one day.

Strategist says

Go for the leaps.

Everyone has their own game plan.

As always.... Key is revisions with today's numbers, revisions positive that is the bonus for trend.

4%-8% growth this year for new home sales with upside if median prices cools down

But for that to happen you need to start hitting the headline numbers with no negative revisions

Number of people age 25 - 54 vs. # new homes for sale.

Bellingham Bill says

Number of people age 25 - 54 vs. # new homes for sale.

The cycle is very soft, weakest housing demand cycle ever for a up cycle, but for this report

Revisions were positive, that's the key.

Already anyone who was looking for 20% growth again is going to be wrong for the 4th year

Comps are still negative year over year but the comps get a lot easier from now on because March 2015 was the start of the decelerating growth

After this month, only high comp to work with is December

The sickness of using at mid 500K number as a high comp in year 8 of the cycle with 4% rates

Logan Mohtashami says

http://loganmohtashami.com/2016/01/25/home-builders-new-homes-sales-and-the-affordability-myth/

I'm wondering.. instead of the sale price, would you have a graph reflecting interest rates (like mortgage payment for a 30yr mortgage)? It may give a better snapshot of where the bubble is/was.

ja says

interest rates

One of the major flaws with the housing pundits in this cycle

They assumed as they said, Housing is the most affordable ever... because 30 year mortgage were at a post WWII low for this cycle and really have been under 4.5% since 2013 and under 5% since early 2011

What they don't take into consideration, is the size of the debt and PITI inflation matters more to housing affordability than just the rate, rate is a one variable housing inflation metric

Bigger the homes, bigger the debt = the bigger total payment

Hence why new home sales missed sales expectations 3 years in a row in years that some of these pundit were forecasting 20%-40% growth

They were using the lowest level of sales, starts and permits to call for a V shape bounce

which this is the reality

KBH

It's a crap builder but it had value $10 now it's up to $14 if anyone took that risk!

After today's negative YoY print, the next 4 months is really it.

If you can't show growth on the YoY prints in the next 4 months with no negative revisions, then ever my 4%-8% growth metrics are simply too high.

Considering how low new home sales are at, this isn't asking a lot

George Pearkes ‏@georgepearkes My end of day wrap-up today. "Housing Supply Still Weak"
https://www.bespokepremium.com/the-closer/the-closer-32316-housing-supply-still-weak/ …

(Another text book chart to show that the low inventory to sales thesis isn't correct )

new homes are a luxury item. latest and greatest style, what you see on tv with fixer upper and all that bullshit.

KBH, it wasn't that great of a report ... but as you can see a trade can be done at any point of a cycle, $10 to $14 was the run, I wouldn't be pushing it here

Logan Mohtashami says

KBH, it wasn't that great of a report ... but as you can see a trade can be done at any point of a cycle, $10 to $14 was the run, I wouldn't be pushing it here

You ain't seen nuttin yet. Just wait till the middle of summer.

Strategist says

You ain't seen nuttin yet. Just wait till the middle of summer.

That's the problem, flattish growth for the rest of the year, sales are up only 4% year over year even with their horrible misses from last year

This is value play here, the stock from 2013 has been horrible, bastard builder child but then again that's why it was trading with a low liquidation value at $10

In any case, this is the worst one on the crop

But to your point

You have 4 months to show headline growth on the new home sales report as for now we down negative growth year over year .... No revision negative, if that doesn't happen

There is a change we get flat to negative growth this year in total new home sales.

I am still looking for 4%-8% growth with some upside if median home price falls since we are working only from a 500K level, but man... have to have to sales come through in the next 4 months